DETROIT –Vice President James Davlin see the auto maker shedding its “Government Motors” nickname after the company achieves investment-grade rating later this year.
“Investment grade will get GM farther away from bankruptcy,” Davlin tells an annual meeting of the Society of Automotive Analysts on the eve of the North American International Auto Show here.
GM got socked with the moniker after taking $50 billion in U.S. taxpayer dollars to fund it 2009 bankruptcy, and executives have complained it keeps the auto maker’s products off the shopping lists of some customers.
GM took a major step in repealing the nickname late last year by buying back 200 million shares from the U.S. Treasury Dept., reducing the government’s stake to 19%. The Treasury has said it plans a complete exit of GM within 12-15 months.
Investment-grade ratings come from agencies such as Standard & Poor’s and are a sign that a company has a very low risk of defaulting on the bonds it issues to support its operations. GM lost its investment-grade status with its bankruptcy.
Last week, GM Chairman and CEO Dan Akerson said the auto maker expects to regain the recognition this year.
“I want to reinforce his comments,” Davlin says, GM’s treasurer and vice president-finance. “Given the financial strength of the company, we are trending to investment grade. We feel very good about the company’s financial strength.”
Asked about the risk of GM going bankrupt again, Davlin says the auto maker’s “fortress balance sheet” could withstand a financial “tsunami.”
He also reiterates GM’s commitment to its Adam Opel subsidiary in Europe, a struggling unit the auto maker nearly sold to a consortium of investors shortly after the U.S. bankruptcy. A decision was made at the last minute to restructure the Germany-based unit.
“We are committed to Opel,” Davlin says, calling the struggling European car market too important to ignore.
GM recently announced the closure of its Bochum, Germany, assembly plant by 2016. The move is seen as a key step in reducing the auto maker’s overcapacity in the region, but Davlin suggests other OEMs must take similar steps if the region is to recover from its slump.
“It is an industry-wide challenge,” he says. “That overcapacity must be addressed in its entirety, not individually.”
Davlin reiterates GM’s plan to get back in the black in Europe by mid-decade.